Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Thanks, graniterider10. I’m going to try and get that down payment sorted out right now. As long as there isn't a massive panic today, it should be fine since I still have some breathing room before the sales tax filing deadline.

graniterider10 said:Thanks, graniterider10. I’m going to try and get that down payment sorted out right now. As long as there isn't a massive panic today, it should be fine since I still have some breathing room before the sales tax filing deadline.

Man, I just realized I posted this in the Sole Proprietors thread... my bad. Given that, just ignore what I said earlier about "booking to the down payment account and then clearing it against account 220"😁
At any rate, they absolutely have to issue you an invoice for that deposit

Yeah, I don't handle the bookkeeping myself 🙂)))) so I'm just gonna be a total pain in their neck regarding that RN. 😉))) Thanks. 😉))

Question – Under the Sarbanes-Oxley Act, account liquidation is mandatory.
Based on my understanding, sole proprietors shouldn't be required to go through the liquidation process—but I keep hearing conflicting things suggesting they actually do need to. Did I miss a specific detail somewhere?

Hey there.

Since there seem to be some experts lurking here, I figured I'd ask...

I run a small solo business as an independent contractor, so I'm not on the standard sales tax system and have no employees.
I pay my taxes once a year based on my filings, and honestly, losing 35% to 40% feels like a massive hit.🙄

Besides mileage reimbursements, what are my best options for lowering my taxable income?🤷

I have office furniture listed as long-term assets; can I use accelerated depreciation on those? What’s the limit?🤔

Also, if I claim a laptop broke—say, a spilled coffee incident—can I write off the full purchase price immediately? Or am I stuck with just the depreciated value regardless of the damage?

Thanks for the help!🙂

Carol Price4 said:Ah, an income earner... well—just close out the accounts, record the payment in kind under receipts, and toss in a note saying the entity was struck from the registry, or whatever else works...

Wait, does that imply I still have to pay sales tax on those specific invoices? Since they’re being recorded as receipts, I'm wondering if I'm on the hook for the tax even though I never actually collected any cash—or did I totally miss the mark on how this works?

I’ve got a few questions popping up: regarding self-employed contributions for December 2015—am I supposed to be filing those right now this month via the tax form, or does that only kick in for the January 2016 contributions due by February 15th? Also, those new numerical codes for contributions based on self-employment... do they apply to the January 2016 payments too?

The State Employment Agency actually paid the contributions for an employee undergoing professional training last year. Should I be recording that as a receipt in my cash book?

Has the new annual tax return through the online IRS portal been released yet, or did I just miss it? I haven't seen the specific tax form for self-employed contributions either... so I’m guessing I don't need to send anything in this month, but... if anyone actually knows...👍🙂

says:
I have a few questions regarding self-employment tax contributions for December 2015: am I supposed to file those right now this month via the standard payroll tax forms, or does that only apply to the January 2016 contributions due by February 15th? Also, regarding those new numeric codes for self-employment contributions... do they apply to the January 2016 payments as well?

Last year, the State Department of Labor reimbursed me for an employee's professional training. Should I record that as a receipt in my cash receipts and disbursements journal?

I haven't seen the new annual tax return through the IRS e-file system yet—has anyone else? I also haven't seen any specific payroll filings for the self-employed contributors... so I'm assuming nothing needs to be sent this month, but... if anyone knows for sure...👍🙂

The new numeric codes and the updated payroll tax filings for self-employed individuals apply to the January 2016 period, which we pay in February 2016.

You should record any funds received from the Bureau of Labor Statistics as receipts.

I haven't seen the new tax return on the IRS e-file portal either. To be honest, with everything changing so fast, I didn't even realize that the supplemental filings were moving over to the electronic system. 🐔

Thanks, account. So, looking at the contributions, this month is basically a carbon copy of last month.
I was under the impression... that you also file your annual self-employment tax return through the e-tax portal... but... I could be wrong. 🙂

My bad. There isn't actually a specific income tax form available through the e-filing portal; instead, those tax withholdings are going to be handled via the quarterly payroll reports. I’m already overthinking things that aren't even an issue... sorry. I guess I just got a little lost in all the technicalities.😢

I’m processing the final payroll for December 2015 tomorrow. I know everything for the employees is straightforward on the tax forms, but how does it work for the employer side—specifically for a sole proprietor? The tax contributions.
Are we sticking to the old 2015 rates and using the same accounts? For instance, am I looking at $43 $23 for account 8591, or is it going to be more than that?
Do these figures also get entered into the electronic tax filings (since I'm still handing in paper forms)?

Also, how will the contribution calculations change for 2016, and when exactly does that kick in?
Will it be based on the tax return, and what's the effective date for reporting this on the digital forms?
I’m completely lost here. Someone please help! 😢

Will the account numbers, like 8214 where we’ve been paying contributions, stay the same this month? Does the change only take effect with the January 2016 payments made in February?
That’s my best guess from reading through this.

Keith Martinez5 said:Wait, does that imply I still have to pay sales tax on those specific invoices? Since they’re being recorded as receipts, I'm wondering if I'm on the hook for the tax even though I never actually collected any cash—or did I totally miss the mark on how this works?

Honestly, I'm wondering the exact same thing.
The instructions are incredibly vague, and I've been trying to get an advisor at the LAPD to call me back for days now, but nothing. Total radio silence.
If you figure anything out, please let me know! 😵

Ronald Adams7 said:I’m processing the final payroll for December 2015 tomorrow. I know everything for the employees is straightforward on the tax forms, but how does it work for the employer side—specifically for a sole proprietor? The tax contributions.
Are we sticking to the old 2015 rates and using the same accounts? For instance, am I looking at $43 $23 for account 8591, or is it going to be more than that?
Do these figures also get entered into the electronic tax filings (since I'm still handing in paper forms)?

Also, how will the contribution calculations change for 2016, and when exactly does that kick in?
Will it be based on the tax return, and what's the effective date for reporting this on the digital forms?
I’m completely lost here. Someone please help! 😢

Will the account numbers, like 8214 where we’ve been paying contributions, stay the same this month? Does the change only take effect with the January 2016 payments made in February?
That’s my best guess from reading through this.

The answers were provided three posts up.
For December 2015, you stick to the old rules, and the electronic filings for January 2016 won't be submitted until February 2016. We should have more specifics regarding the filing details and the payment reference numbers within a few days, so we can discuss them here once they're clear.
Contributions will be slightly higher than they were in 2015 because the base rate increased to $1741, so the total will go up by roughly $23. You'll handle the electronic filing for those contributions just like you did for the income tax; the main difference is that we are now taking over their role, meaning we'll submit the electronic filing for taxes and withholdings on the day of the payment.

Brenda Chase3 said:The answers were provided three posts up.
For December 2015, you stick to the old rules, and the electronic filings for January 2016 won't be submitted until February 2016. We should have more specifics regarding the filing details and the payment reference numbers within a few days, so we can discuss them here once they're clear.
Contributions will be slightly higher than they were in 2015 because the base rate increased to $1741, so the total will go up by roughly $23. You'll handle the electronic filing for those contributions just like you did for the income tax; the main difference is that we are now taking over their role, meaning we'll submit the electronic filing for taxes and withholdings on the day of the payment.

Just to add some more context here... The new account numbers for small business owners to make their contribution payments are as follows:
8230 - Social Security 1st tier
2330 - Social Security 2nd tier
8605 - Unemployment Insurance
8796 - Employment Tax Credit
8133 - Workers' Comp Contributions

Like account12345 mentioned, we're still waiting on the official word regarding reporting methods, specific examples, and the rest of the fine print, so we'll pick this back up once that hits our desks... 🙂

QUICK QUESTION HERE:

What’s the deal with the sales tax for 12/15?

Am I basically just doing the most basic math on the planet and then maybe tweaking things if I catch a mistake... and that's it?

Basically, I need to know if this works like a standard sales tax calculation (just totaling everything up), or if it's strictly about the specific revenue categories for the 12/15 period.

Honestly, nothing could surprise me at this point, but I figured I'd ask before I panic and send off the form before you guys have a chance to teach me how to actually do this properly. 😁

Carol Price4 said:The W-2 for payroll tax and health insurance contributions uses the actual payment date if you pay by the 15th—but if the filing happens after the 15th, the date defaults to the 15th since that's when the contributions actually become due... I think I read that somewhere, let me try to dig it up...

I was honestly pretty surprised by what Milivoj wrote regarding those advance payments... it seems like total nonsense! Based on the logic above, it should be the payment date if settled by month-end, or the last day of the month if filed later 🤔🤔 ...that’s just my take on it, though, so don't hold me to it...

I'll do some digging, and if I find anything useful, I'll post it here, 🙂

Small business owners are going to be in such a mess now. They're used to having a bit of wiggle room, and now they're being squeezed tight—again, and once again, it's us taking the hit. Honestly, we should be asking for early retirement benefits after all this crap they've piled on our shoulders!

Man, if the proposed amendments actually strip out non-taxable income under section 39—meaning the W-2 will only cover per diems and travel reimbursements moving forward—then woohoo! At least there's one decent thing happening!

Devilgirl, what happens with those small contractors who only bother paying their taxes and prepayments once a year? Are they supposed to file a payroll report and account for contributions and prepayments every single month?

amberbadger17 said:QUICK QUESTION HERE:

What’s the deal with the sales tax for 12/15?

Am I basically just doing the most basic math on the planet and then maybe tweaking things if I catch a mistake... and that's it?

Basically, I need to know if this works like a standard sales tax calculation (just totaling everything up), or if it's strictly about the specific revenue categories for the 12/15 period.

Honestly, nothing could surprise me at this point, but I figured I'd ask before I panic and send off the form before you guys have a chance to teach me how to actually do this properly. 😁

Yeah. First, you go through everything from January 1st all the way through November 30th to make sure it's solid, and if everything looks good, you just run the standard calculation for December. If you end up finding mistakes from that January to November stretch, you just bake those corrections right into the December filing...

Hey everyone! Quick question—could someone clarify which label I should use for "recipient" versus "income" when dealing with a sole proprietor's earnings? I'm trying to get everything squared away while setting up a Sole Proprietorship file in the new module over at Sinesys LLC. Thanks so much!

Keith Martinez5 said:Hey everyone! Quick question—could someone clarify which label I should use for "recipient" versus "income" when dealing with a sole proprietor's earnings? I'm trying to get everything squared away while setting up a Sole Proprietorship file in the new module over at Sinesys LLC. Thanks so much!

We're all still waiting on updates; we will post as soon as we hear anything. 😉

Keith Martinez5 said:Hey everyone! Quick question—could someone clarify which label I should use for "recipient" versus "income" when dealing with a sole proprietor's earnings? I'm trying to get everything squared away while setting up a Sole Proprietorship file in the new module over at Sinesys LLC. Thanks so much!

I assume you mean the Non-profit organization document.

Taxpayer code: 0041 through 0046
Income code: 5801 through 5807

The new setup won't let me enter any codes other than the ones listed above.